East Asia in the 21st Century



The Rising Economies of East Asia

East Asia is home to some of the world’s most prosperous economies while Southeast Asia witnesses the growth of some of the world’s fastest growing emerging economies, with favorable political-legal environments for industry and commerce, abundant natural resources, and adaptable labor determined to be the main factors of the success.

Learning Objectives

Explain how East Asian economies have been increasing their share of the global economy.

Key Takeaways

Key Points

  • East Asian countries’ various reforms resulted in “economic miracles,” making East Asia home to some of the world’s largest and most prosperous economies, including Mainland China, Hong Kong, Macau, Taiwan, Japan, and South Korea. Major growth factors have ranged from favorable political and legal environments for industry and commerce, through abundant natural resources, to plentiful supplies of relatively low-cost, skilled, and adaptable labor. The region’s economic success has led the World Bank to dub it an East Asian Renaissance.
  • The economy of Japan is the third-largest in the world by nominal GDP, the fourth-largest by purchasing power parity (PPP), and the world’s second largest developed economy. Japan is the world’s third largest automobile manufacturing country, has the largest electronics goods industry, and is often ranked among the world’s most innovative countries. The Japanese economy faces considerable challenges posed by a dramatically declining population.
  • China’s socialist market economy is the world’s second largest economy by nominal GDP and the world’s largest economy by PPP according to the IMF. China is a global hub for manufacturing and the largest manufacturing economy in the world as well as the largest exporter of goods in the world. China’s unequal transportation system—combined with important differences in the availability of natural and human resources and in industrial infrastructure—has produced significant variations in the regional economies. More recently, the government has struggled to contain the social strife and environmental damage related to the economy’s rapid transformation.
  • In accordance with the One Country, Two Systems policy, the economies of the former British colony of Hong Kong and Portuguese colony of Macau are separate from the rest of China and each other. Both Hong Kong and Macau are free to conduct and engage in economic negotiations with foreign countries as well as participate as full members in various international economic organizations.
  • The Four Asian Tigers are the economies of Hong Kong, Singapore, South Korea, and Taiwan, which underwent rapid industrialization and maintained exceptionally high growth rates between the early 1960s (mid-1950s for Hong Kong) and 1990s. By the 21st century, all four had developed into advanced an  high-income economies, specializing in areas of competitive advantage. Export policies have been the de facto reason for the rise of the Four Asian Tiger economies although te approach taken has been different among the four nations.
  • The term Tiger Cub Economies collectively refers to the economies of Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. Four countries are included in HSBC’s list of top 50 economies in 2050, while Vietnam  Indonesia, and the Philippines are included in Goldman Sachs’s Next Eleven list of economies because of their rapid growth and large population. Out of these, Vietnam has been determined to become possibly the fastest-growing of the world’s emerging economies by 2020. The so-called “bamboo network” – a network of overseas Chinese businesses operating in these markets – has been critical to the countries’ economic growth.

Key Terms

  • One Country, Two Systems: A constitutional principle formulated by Deng Xiaoping, the Paramount Leader of the People’s Republic of China (PRC), for the reunification of China during the early 1980s. He suggested that there would be only one China, but distinct Chinese regions such as Hong Kong and Macau could retain their own capitalist economic and political systems, while the rest of China uses the socialist system.
  • bamboo network: A term used to conceptualize connections between certain businesses operated by overseas Chinese in Southeast Asia. It links the overseas Chinese community of Southeast Asia (Malaysia, Indonesia, Thailand, Vietnam, the Philippines, and Singapore) with the economies of Greater China (mainland China, Hong Kong, Macau, and Taiwan). Overseas Chinese companies have a prominent role in the private sector of Southeast Asia and are usually managed as family businesses with a centralized bureaucracy.
  • Tiger Cub Economies: A collective term used to refer to the economies of Indonesia, Malaysia, the Philippines, Thailand and Vietnam, the five dominant countries in Southeast Asia. They are so named because they follow the same export-driven model of economic development pursued by the Four Asian Tigers.
  • Four Asian Tigers: A collective name used to refer to the economies of Hong Kong, Singapore, South Korea, and Taiwan, which underwent rapid industrialization and maintained exceptionally high growth rates (in excess of 7 percent a year) between the early 1960s (mid-1950s for Hong Kong) and 1990s.
  • socialist market economy: The economic model employed by the People’s Republic of China. It is based on the dominance of the state-owned sector and an open-market economy and has its origins in the Chinese economic reforms introduced under Deng Xiaoping. The ideological rationale is that China is in the primary stage of socialism, an early stage within the socialist mode of production and therefore has to adapt capitalist techniques to thrive. Despite this, the system has widely been cited as a form of state capitalism.
  • G7: A group consisting of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. These countries are the seven major advanced economies as reported by the International Monetary Fund and represent more than 64% of the net global wealth ($263 trillion).

East Asian Renaissance

The economy of East Asia is one of the most successful regional economies of the world. The changes that turned the area into the economic power began with the Meiji Restoration in the late 19th century, when Japan rapidly transformed into the only industrial power outside Europe and the United States. Japan’s early industrial economy reached its height during World War II and its eventual defeat in the war slowed down economic development for a relatively short period of time. Japan’s economy recovered already in the 1950s and by the 1980s, the country was the world’s second largest economy.

Other East Asian countries followed with their own reforms and resulting “economic miracles” and today, East Asia is home of some of the world’s largest and most prosperous economies, including Mainland China, Hong Kong, Macau, Taiwan, Japan, and South Korea. Major growth factors have ranged from favorable political and legal environments for industry and commerce, through abundant natural resources, to plentiful supplies of relatively low-cost, skilled, and adaptable labor. Local populations have rapidly adjusted to the requirements of new technologies and scientific discoveries while also demonstrating exceptional work ethics. The region’s economic success has led the World Bank to dub it an East Asian Renaissance.

Although technically not seen as part of the East Asian Renaissance, India, associated more closely with the South Asian region, has become an equally thriving and critical Asian member of the global economy in the last several decades. For more information on India’s economic power see “India’s Growing Economy” module.

Japan

In the three decades of economic development following 1960, Japan ignored defense spending in favor of economic growth, thus allowing for a rapid economic growth referred to as the Japanese post-war economic miracle. With average growth rates of 10% in the 1960s, 5% in the 1970s, and 4% in the 1980s, Japan was able to establish and maintain itself as the world’s second largest economy from 1978 until 2010, when it was surpassed by the People’s Republic of China.

The economy of Japan is the third-largest in the world by nominal GDP, the fourth-largest by purchasing power parity (PPP), and the world’s second largest developed economy. Japan is a member of the G7. Due to a volatile currency exchange rate, Japan’s GDP as measured in dollars fluctuates widely. Accounting for these fluctuations, Japan is estimated to have a GDP per capita of around $38,490.

Japan is the world’s third largest automobile manufacturing country, has the largest electronics goods industry, and is often ranked among the world’s most innovative countries leading several measures of global patent filings. Facing increasing competition from China and South Korea, manufacturing in Japan today focuses primarily on high-tech and precision goods, such as optical instruments, hybrid vehicles, and robotics. Japan is the world’s largest creditor nation. It generally runs an annual trade surplus and has a considerable net international investment surplus. In 2015, 54 of the Fortune Global 500 companies were based in Japan.

The Japanese economy faces considerable challenges posed by a dramatically declining population. Statistics showed an official decline for the first time in 2015, while projections suggest that it will continue to fall from 127 million down to below 100 million by the middle of the 21st century. A mountainous, volcanic island country, Japan has inadequate natural resources to support its growing economy and large population and therefore exports goods, in which it has a comparative advantage such as engineering-oriented, research, and development-led industrial products in exchange for the import of raw materials and petroleum. Japan is among the top-three importers for agricultural products in the world next to the European Union and United States in total volume for covering of its own domestic agricultural consumption.

China

China’s socialist market economy is the world’s second largest economy by nominal GDP and the world’s largest economy by PPP according to the IMF, although China’s National Bureau of Statistics rejects this claim. Until 2015, China was the world’s fastest-growing major economy, with growth rates averaging 10% over 30 years. Due to historical and political facts of China’s developing economy, China’s public sector accounts for a bigger share of the national economy than the burgeoning private sector.

China is a global hub for manufacturing and is the largest manufacturing economy in the world as well as the largest exporter of goods in the world. It is also the world’s fastest growing consumer market and second largest importer of goods in the world. It is a net importer of services products and the largest trading nation in the world, playing the most important role in international trade. However, Western media have criticized China for unfair trade practices, including artificial currency devaluation, intellectual property theft, protectionism, and local favoritism due to one-party oligopoly by the Communist Party of China and its socialist market economy.

China’s unequal transportation system—combined with important differences in the availability of natural and human resources and in industrial infrastructure—has produced significant variations in the regional economies of China. Economic development has generally been more rapid in coastal provinces than in the interior and there are large disparities in per capita income between regions. Three wealthiest regions are along the southeast coast. It is the rapid development of these areas that is expected to have the most significant effect on the Asian regional economy as a whole and Chinese government policy is designed to remove the obstacles to accelerated growth in these wealthier regions.

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A Chinese coal miner at the Jin Hua Gong Mine, photo by Peter Van den Bossche.

One of the hallmarks of China’s socialist economy was its promise of employment to all able and willing to work and job-security with virtually lifelong tenure. Reformers targeted the labor market as unproductive because industries were frequently overstaffed to fulfill socialist goals and job-security reduced workers’ incentive to work. This socialist policy was pejoratively called the iron rice bowl.

More recently, the government has struggled to contain the social strife and environmental damage related to the economy’s rapid transformation. Battling corruption and other economic crimes as well as sustaining adequate job growth for tens of millions of workers laid off from state-owned enterprises, migrants, and new entrants to the work force have also been some of the major challenges. From 50 to 100 million rural workers were adrift between the villages and the cities, many subsisting through part-time low-paying jobs. Although the economic growth has resulted in the creation of a strong middle class, hundreds of millions remain excluded from its benefits and inequalities persist. The large-scale underemployment in both urban and rural areas and changing price policies remain a source of concern for the government as potential causes of popular resistance. The prices of certain key commodities, especially of industrial raw materials and major industrial products, are determined by the state and large subsidies were built into the price structure. By the early 1990s, these subsidies began to be eliminated, in large part due to China’s admission into the World Trade Organization (WTO) in 2001, which carried with it requirements for further economic liberalization and deregulation. On a per capita income basis, China ranked 72nd by nominal GDP and 84th by GDP (PPP) in 2015, according to the IMF.

In accordance with the One Country, Two Systems policy, the economies of the former British colony of Hong Kong and Portuguese colony of Macau are separate from the rest of China and each other. Both Hong Kong and Macau are free to conduct and engage in economic negotiations with foreign countries as well as participate as full members in various international economic organizations, often under the names “Hong Kong, China” and “Macau, China.” Both regions retain their own capitalist economic and political systems.

Four Asian Tigers

The Four Asian Tigers are the economies of Hong Kong, Singapore, South Korea, and Taiwan, which underwent rapid industrialization and maintained exceptionally high growth rates (in excess of 7 percent a year) between the early 1960s (mid-1950s for Hong Kong) and 1990s. By the 21st century, all four had developed into advanced and high-income economies, specializing in areas of competitive advantage. For example, Hong Kong and Singapore have become world-leading international financial centers, whereas South Korea and Taiwan are world leaders in information technology manufacturing. Their economic success stories have served as role models for many developing countries, especially the Tiger Cub Economies (see below).

Export policies have been the de facto reason for the rise of the Four Asian Tiger economies. The approach taken has been different among the four nations. Hong Kong and Singapore introduced trade regimes that were neoliberal in nature and encouraged free trade, while South Korea and Taiwan adopted mixed regimes that accommodated their own export industries. In Hong Kong and Singapore, due to small domestic markets, domestic prices were linked to international prices. South Korea and Taiwan introduced export incentives for the traded-goods sector. The governments of Singapore, South Korea, and Taiwan also worked to promote specific exporting industries, which were termed as an export push strategy. All these policies helped these four nations to achieve a growth averaging 7.5% each year for three decades and as such they achieved developed country status.

A controversial World Bank report (see The East Asian Miracle 1993) credited neoliberal policies with the responsibility for the boom, including maintenance of export-led regimes, low taxes, and minimal welfare states. Some state intervention has been also admitted to be a factor. However, many have argued that industrial policy had a much greater influence than the World Bank report suggested. The World Bank report itself acknowledged benefits from policies of the repression of the financial sector, such as state-imposed below-market interest rates for loans to specific exporting industries. Other important aspects include major government investments in education, non-democratic and relatively authoritarian political systems during the early years of development, high levels of U.S. bond holdings, and high public and private savings rates.

Tiger Cub Economies

The term Tiger Cub Economies collectively refers to the economies of Indonesia, Malaysia, the Philippines, Thailand, and Vietnam, the five dominant countries in Southeast Asia. They are so named because they follow the same export-driven model of economic development pursued by the Four Asian Tigers. Four countries are included in HSBC’s list of top 50 economies in 2050, while Vietnam, Indonesia and the Philippines are included in Goldman Sachs’s Next Eleven list of economies because of their rapid growth and large population. Out of these, Vietnam has been determined to become possibly the fastest-growing of the world’s emerging economies by 2020. Similarly to China, the country’s socialist-oriented market economy is a developing planned economy and market economy. In the 21st century, Vietnam is in a period of being integrated into the global economy. It has become a leading agricultural exporter and served as an attractive destination for foreign investment in Southeast Asia.

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The Tiger Cub Economies (yellow) are five countries: Indonesia, Malaysia, Philippines, Thailand and Vietnam. Also shown are the Four Asian Tigers (red), source: Wikipedia.: The term “bamboo network” is used to conceptualize connections between certain businesses operated by overseas Chinese in Southeast Asia. It links the overseas Chinese community of Southeast Asia (Malaysia, Indonesia, Thailand, Vietnam, the Philippines, and Singapore) with the economies of Greater China (mainland China, Hong Kong, Macau, and Taiwan). Overseas Chinese companies have a prominent role in the private sector of Southeast Asia, and are usually managed as family businesses with a centralized bureaucracy.

Overseas Chinese entrepreneurs played a prominent role in the development of the region’s private sectors. These businesses are part of the larger “bamboo network,” a network of overseas Chinese businesses operating in the markets of Malaysia, Indonesia, Thailand, Vietnam, and the Philippines that share common family and cultural ties. China’s transformation into a major economic power in the 21st century has led to increasing investments in Southeast Asian countries where the bamboo network is present.

Tensions in the South China Sea

Several countries have made competing territorial claims over the South China Sea, as one-third of the world’s shipping sails through its waters and it is believed to hold huge oil and gas reserves beneath its seabed, turning the territorial disputes into Asia’s most potentially dangerous source of conflict.

Learning Objectives

Identify the causes of territorial disputes in the South China Sea

Key Takeaways

Key Points

  • The South China Sea is a marginal sea encompassing an area from the Karimata and Malacca Straits to the Strait of Taiwan. The sea is located south of China, east of Vietnam and Cambodia, northwest of the Philippines, east of the Malay peninsula and Sumatra up to the Strait of Malacca in the west, and north of the Bangka–Belitung Islands and Borneo. One-third of the world’s shipping sails through its waters and it is believed the sea holds huge oil and gas reserves beneath its seabed.
  • Several countries have made competing territorial claims over the South China Sea. These disputes have been seen as Asia’s most potentially dangerous point of conflict. Both China and Taiwan claim almost the entire body as their own, demarcating their claims within what is known as the nine-dash line. Competing claims over parts of the area include Indonesia, the Philippines, Vietnam, Brunei, Malaysia, Cambodia, and Thailand.
  • The area may be rich in oil and natural gas deposits, although estimates vary. The once abundant fishing opportunities within the region are another motivation for claims. According to studies by the Department of Environment and Natural Resources (Philippines), this body of water holds one-third of the entire world’s marine biodiversity, making it a very important area for the ecosystem. Finally, the area is one of the busiest shipping routes in the world.
  • China and Vietnam have both been vigorous in prosecuting their claims. The Association of Southeast Asian Nations (ASEAN) in general and Malaysia in particular have been keen to ensure that the territorial disputes within the South China Sea do not escalate into armed conflicts. Joint Development Authorities have been set up in areas of overlapping claims to jointly develop the area and divide the profits equally, without settling the issue of sovereignty. Generally, China has preferred to resolve competing claims bilaterally, while some ASEAN countries prefer multi-lateral talks.
  • In 2011, China attempted to keep India away from the South China Sea waters and protested Indian-Vietnamese cooperation in the oil sector. Vietnam and Japan reached an agreement early in 1978 on the development of oil in the South China Sea, which gradually turned Vietnam into a powerful oil producer. In 2012 and 2013, Vietnam and Taiwan clashed over what Vietnam considered anti-Vietnamese military exercises by Taiwan. In 2014, Indonesia imposed a policy threatening any foreign fishermen caught illegally fishing in Indonesian waters to destroy their vessels. Since then, many neighboring countries fishing vessels have been blown up by Indonesian authorities. The South China Sea had also become known for Indonesian and Filipino pirates.
  • The United States and China are currently in disagreement over the South China Sea. The U.S. State Department voiced support for fair access by reiterating that freedom of
    navigation and respect of international law are a matter of national interest to the United States. China’s Foreign Ministry stated that this stand was “in effect an attack on China.” China has repeatedly warned the U.S. to stay out of the issue and that its involvement may lead to a military conflict.
  • The position of China on its maritime claims based on UNCLOS and history has been ambiguous, particularly with the nine-dash line map. China has also repeatedly indicated that the Chinese claims are drawn  on a historical basis, but the vast majority of international legal experts have concluded that China’s claims based on historical claims are invalid.

Key Terms

  • South China Sea: A marginal sea that is part of the Pacific Ocean, encompassing an area from the Karimata and Malacca Straits to the Strait of Taiwan. One-third of the world’s shipping sails through its waters and it is believed the sea holds huge oil and gas reserves beneath its seabed. Several countries have made competing territorial claims over the area.
  • Association of Southeast Asian Nations: A regional organization comprising ten Southeast Asian states, which promotes intergovernmental cooperation and facilitates economic integration amongst its members. Since its founding in 1967 by Indonesia, Malaysia, the Philippines, Singapore, and Thailand, the organization’s membership has expanded to include Brunei, Cambodia, Laos, Myanmar (Burma), and Vietnam. Its principal aims include accelerating economic growth, social progress, and sociocultural evolution among its members, alongside the protection of regional stability and the provision of a mechanism for member countries to resolve differences peacefully.
  • nine-dash line: A term that refers to the demarcation line used initially by the government of the Republic of China (ROC/Taiwan) and subsequently also by the government of the People’s Republic of China (PRC), for their claims of the major part of the South China Sea. The contested area in the South China Sea includes the Paracel Islands, the Spratly Islands, and various other areas including the Pratas Islands, the Macclesfield Bank, and the Scarborough Shoal. The claim encompasses the area of Chinese land reclamation known as the “great wall of sand.”
  • exclusive economic zone: A sea zone prescribed by the United Nations Convention on the Law of the Sea, over which a state has special rights regarding the exploration and use of marine resources, including energy production from water and wind. It stretches from the baseline out to 200 nautical miles (nmi) from its coast. As opposed to the territorial sea, which confers full sovereignty over the waters, this type of a sea zone is merely a “sovereign right,” which refers to the coastal state’s rights below the surface of the sea. The surface waters are international waters.
  • Philippines v. China: An arbitration case brought by the Republic of the Philippines against the People’s Republic of China under Annex VII to the United Nations Convention on the Law of the Sea (UNCLOS) concerning certain issues in the South China Sea including the legality of China’s “nine-dash line” claim. In 2013, China declared that it would not participate but in 2015, the arbitral tribunal ruled that it has jurisdiction over the case. In 2016, the tribunal ruled in favor of the Philippines. China has rejected the ruling, as has Taiwan.
  • United Nations Convention on the Law of the Sea: The international agreement that defines the rights and responsibilities of nations with respect to their use of the world’s oceans, establishing guidelines for businesses, the environment, and the management of marine natural resources. It was concluded in 1982.

Territorial Disputes in the South China Sea

The South China Sea is a marginal sea that is part of the Pacific Ocean, encompassing an area from the Karimata and Malacca Straits to the Strait of Taiwan (around 3.5 million sq km or 1.4 million sq mi). The sea is located south of China, east of Vietnam and Cambodia, northwest of the Philippines, east of the Malay peninsula and Sumatra, up to the Strait of Malacca in the west, and north of the Bangka–Belitung Islands and Borneo.

The area’s importance results from the fact that one-third of the world’s shipping sails through its waters and it is believed to hold huge oil and gas reserves beneath its seabed. Several countries have made competing territorial claims over the South China Sea. These disputes have been seen as Asia’s most potentially dangerous point of conflict. Both People’s Republic of China (PRC) and the Republic of China (ROC, commonly known as Taiwan) claim almost the entire body as their own, demarcating their claims within what is known as the nine-dash line. The area overlaps the exclusive economic zone (EEZ) claims of Brunei, Indonesia, Malaysia, the Philippines, Taiwan, and Vietnam.
Competing claims include:

  • Indonesia, China, and Taiwan over waters northeast of the Natuna Islands
  • The Philippines, China, and Taiwan over Scarborough Shoal
  • Vietnam, China, and Taiwan over waters west of the Spratly Islands, some of which are also disputed between Vietnam, China, Taiwan, Brunei, Malaysia, and the Philippines
  • The Paracel Islands are disputed between China, Taiwan, and Vietnam
  • Malaysia, Cambodia, Thailand, and Vietnam over areas in the Gulf of Thailand
  • Singapore and Malaysia along the Strait of Johore and the Strait of Singapore
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Territorial claims in the South China Sea, map by Voice of America.

The disputes include the islands, reefs, banks, and other features of the South China Sea, including the Spratly Islands, Paracel Islands, and various boundaries in the Gulf of Tonkin. There are further disputes, including the waters near the Indonesian Natuna Islands, which many do not regard as part of the South China Sea. Claimaint states are interested in retaining or acquiring the rights to fishing areas, the exploration and potential exploitation of crude oil and natural gas in the seabed of various parts of the South China Sea, and the strategic control of important shipping lanes.

Importance of the South China Sea

The area may be rich in oil and natural gas deposits although estimates vary from 7.5 billion to 125 billion barrels of oil and from 190 trillion cubic feet to 500 trillion cubic feet of gas. The once abundant fishing opportunities within the region are another motivation for claims. China believes that the value in fishing and oil from the sea may be as much as a trillion dollars. According to studies made by the Department of Environment and Natural Resources (Philippines), this body of water holds one-third of the entire world’s marine biodiversity, making it a very important area for the ecosystem. However, the fish stocks in the area are depleted and countries are using fishing bans to assert their sovereignty claims. Finally, the area is one of the busiest shipping routes in the world. In the 1980s, at least 270 merchant ships used the route each day. Currently, more than half the tonnage of oil transported by sea passes through the South China Sea, a figure rising steadily with the growth of the Chinese consumption of oil. This traffic is three times greater than that passing through the Suez Canal and five times more than the Panama Canal.

Disputes

China and Vietnam have both been vigorous in prosecuting their claims. China (various governments) and South Vietnam each controlled part of the Paracel Islands before 1974. A brief conflict in 1974 resulted in 18 Chinese and 53 Vietnamese deaths and China has controlled the whole of Paracel since then. The Spratly Islands have been the site of a naval clash, in which over 70 Vietnamese sailors were killed in 1988. Disputing claimants regularly report clashes between naval vessels.

The Association of Southeast Asian Nations (ASEAN) in general and Malaysia in particular have been keen to ensure that the territorial disputes within the South China Sea do not escalate into armed conflicts. Joint Development Authorities have been set up in areas of overlapping claims to jointly develop the area and divide the profits equally, without settling the issue of sovereignty. Generally, China has preferred to resolve competing claims bilaterally, while some ASEAN countries prefer multi-lateral talks, believing that they are disadvantaged in bilateral negotiations with China and that because many countries claim the same territory, only multilateral talks could effectively resolve the competing claims. For example, the International Court of Justice settled the overlapping claims over Pedra Branca/Pulau Batu Putih, including neighboring Middle Rocks, by Singapore and Malaysia in 2008, awarding Pedra Branca/Pulau Batu Puteh to Singapore and Middle Rocks to Malaysia.

In 2011, one of India’s amphibious assault vessels on a friendly visit to Vietnam was reportedly contacted at a distance of 45 nautical miles from the Vietnamese coast in the disputed South China Sea on an open radio channel by a vessel identifying itself as the Chinese Navy and stating that the ship was entering Chinese waters. The spokesperson for the Indian Navy clarified that as no ship or aircraft was visible and thus the vessel proceeded on her onward journey as scheduled. The same year, shortly after China and Vietnam had signed an agreement seeking to contain a dispute over the South China Sea, India’s state-run explorer, Oil and Natural Gas Corporation (ONGC) said that its overseas investment arm ONGC Videsh Limited had signed a three-year deal with PetroVietnam for developing long-term cooperation in the oil sector and that it had accepted Vietnam’s offer of exploration in certain specified blocks in the South China Sea. In response, Chinese Foreign Ministry spokesperson Jiang Yu issued a protest.

Vietnam and Japan reached an agreement early in 1978 on the development of oil in the South China Sea. By 2012, Vietnam had concluded some 60 oil and gas exploration and production contracts with various foreign companies. In 2011, Vietnam was the sixth-largest oil producer in the Asia-Pacific region, although the country is a net oil importer.

China’s first independently designed and constructed oil drilling platform in the South China Sea is the Ocean Oil 981. It began operation in 2012, 320 kilometers (200 mi) southeast of Hong Kong, employing 160 people. In 2014, the platform was moved near to the Paracel Islands, which propelled Vietnam to state that the move violated their territorial claims. Chinese officials said it was legal, stating the area lies in waters surrounding the Paracel Islands, which China occupies and militarily controls.

In 2012 and 2013, Vietnam and Taiwan clashed over what Vietnam considered anti-Vietnamese military exercises by Taiwan.

Prior to the dispute around the sea areas, fishermen from involved countries tended to enter on each other’s controlled islands and EEZ, which led to conflicts with the authorities that controlled the areas as they were unaware of the exact borders. Due to the depletion of the fishing resources in their maritime areas, fishermen felt compelled to fish in the neighboring country’s areas. After Joko Widodo became President of Indonesia in 2014, he imposed a policy threatening any foreign fishermen caught illegally fishing in Indonesian waters to destroy their vessels. Since then, many neighboring countries’ fishing vessels have been blown up by Indonesian authorities. On May 21, 2015, around 41 fishing vessels from China, Vietnam, Thailand, and the Philippines were blown up. On March 19, 2016, China Coast Guard prevented its fishermen from being detained by Indonesian authorities when the Chinese fishermen were caught fishing near the waters around Natuna, leading to a protest by Indonesian authorities. Further Indonesian campaigns against foreign fishermen resulted in 23 fishing boats from Malaysia and Vietnam being blown up on April 5, 2016. The South China Sea had also become known for Indonesian pirates, with frequent attacks on Malaysian, Singaporean, and Vietnamese vessels and for Filipino pirates attacking Vietnamese fishermen.

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A map of South China Sea claims and boundary agreements, U.S. Department of Defense’s Annual Report on China to Congress, 2012.

An estimated US$5 trillion worth of global trade passes through the South China Sea and there are many non-claimant states that want the South China Sea to remain as international waters. Several states (e.g. the United States of America) are conducting “freedom of navigation” operations to promote this situation.

U.S. Position

The United States and China are currently in disagreement over the South China Sea, exacerbated by the fact that the US is not a member of the United Nations Convention on the Law of the Sea (the United States recognizes the UNCLOS as a codification of customary international law but has not ratified it). Nevertheless, the U.S. has stood by its claim that “peaceful surveillance activities and other military activities without permission in a country’s exclusive economic zone” are allowed under the convention. In relation to the dispute, former U.S. State Secretary Hillary Clinton voiced her support for fair access by reiterating that freedom of navigation and respect of international law is a matter of national interest to the United States. China’s Foreign Minister Yang Jiechi stated that the stand was “in effect an attack on China” and warned the United States against making the South China Sea an international or multilateral issue. Clinton testified in support of congressional approval of the Law of the Sea Convention, which would strengthen U.S. ability to support countries that oppose Chinese claims to certain islands in the area. Clinton also called for China to resolve the territorial dispute but China responded by demanding the U.S.  stay out of the issue. This came at a time when both countries were engaging in naval exercises in a show of force to the opposing side, which increased tensions in the region. The U.S. Department of Defense released a statement in which it opposed the use of force to resolve the dispute and accused China of assertive behavior.

In 2014, the United States responded to China’s claims over the fishing grounds of other nations by stating that “China has not offered any explanation or basis under international law for these extensive maritime claims.” While the US pledged American support for the Philippines in its territorial conflicts with the PRC, the Chinese Foreign Ministry asked the United States to maintain a neutral position on the issue. In 2014 and 2015, the United States continued freedom of navigation operations, including in the South China Sea. In 2015, Secretary of Defense Ash Carter warned China to halt its rapid island-building. In November 2015, two US B-52 strategic bombers flew near artificial Chinese-built islands in the area of the Spratly Islands and were contacted by Chinese ground controllers but continued their mission undeterred.

In response to Rex Tillerson’s comments on blocking access to man-made islands in the South China Sea, in January 2017, the Communist Party-controlled Global Times warned of a “large-scale war” between the U.S. and China, noting, “Unless Washington plans to wage a large-scale war in the South China Sea, any other approaches to prevent Chinese access to the islands will be foolish.”

Independent Analysis

The position of China on its maritime claims based on UNCLOS and history has been ambiguous, particularly with the nine-dash line map. For example, in 2011, China stated that it has undisputed sovereignty over the islands and the adjacent waters, suggesting it is claiming sovereignty over its territorial waters, a position consistent with UNCLOS. However, it also stated that China enjoys sovereign rights and jurisdiction over the relevant waters along with the seabed and subsoil contained in this region, suggesting that China is claiming sovereignty over all of the maritime space (includes all the geographic features and the waters within the nine-dash line). China has also repeatedly indicated that the Chinese claims are drawn  on a historical basis.

The vast majority of international legal experts have concluded that China’s claims based on historical claims are invalid. For example, in 2013, the Republic of the Philippines brought an arbitration case against the People’s Republic of China under Annex VII to UNCLOS, concerning certain issues in the South China Sea including the legality of China’s “nine-dash line” claim (Philippines v. China, known also as the South China Sea Arbitration). China declared that it would not participate in the arbitration but in 2015, the arbitral tribunal ruled that it had jurisdiction over the case, taking up seven of the 15 submissions made by the Philippines. In 2016, the tribunal ruled in favor of the Philippines. It clarified that it would not “…rule on any question of sovereignty over land territory and would not delimit any maritime boundary between the Parties.” The tribunal also confirmed that China has “no historical rights” based on the “nine-dash line” map. China has rejected the ruling, as has Taiwan.

The Koreas in the Modern Day

Tensions between South Korea and North Korea continue to escalate as the countries never signed a peace treaty after the Korean War and thus formally remain at war, with each incident potentially triggering a military conflict.

Learning Objectives

Summarize the remaining tensions between North and South Korea and how the two countries have developed

Key Takeaways

Key Points

  • In 1998, South Korean President Kim Dae-jung announced the so-called Sunshine Policy towards North Korea. The main aim of the policy was to soften North Korea’s attitudes towards the South by encouraging interaction and economic assistance. In 2000, the first Inter-Korean Summit between Kim Dae-jung and Kim Jong-il took place. As a result, Kim Dae-jung was awarded the Nobel Peace Prize.
  • The June 15 North–South Joint Declaration the two leaders signed during the first South-North summit stated that they would hold the second summit at an appropriate time. It was originally envisaged that the second summit would be held in South Korea, but that did not materialize. In 2007, South Korean President Roh Moo-hyun and North Korean leader Kim Jong-il signed the peace declaration. The document called for international talks to replace the Armistice that ended the Korean War with a permanent peace treaty.
  • In 2008, the new president of the South Lee Myung-bak and his Grand National Party took a different stance to North Korea, and the South Korean government stated that any expansion of the economic cooperation at the Kaesong Industrial Region would only happen if the North resolved the international standoff over its nuclear weapons. In 2010, the South Korean Unification Ministry officially declared the Sunshine Policy a failure, thus bringing it to an end.
  • In 2011, the supreme leader of North Korea Kim Jong-il died from a heart attack. His youngest son Kim Jong-un was announced as his successor. Under Kim Jong-un, North Korea has continued to develop nuclear weapons. In 2016, Kim Jong-un stated that North Korea would “not use nuclear weapons first unless aggressive hostile forces use nuclear weapons to invade on our sovereignty.” However, on other occasions, North Korea has threatened “preemptive” nuclear attacks against a U.S.-led attack. Under Kim Jong-in, extreme human rights abuses and food insecurity remain major issues in North Korea.
  • Over the last years, several incidents have contributed to the growing tensions between South Korea and North Korea, including sinking of a South Korean ship caused by a North Korean torpedo, North Korea launching a scientific and technological satellite that reached orbit, and North Korea planting planting a mine that went off at the Korean Demilitarized Zone, wounding two South Korean soldiers.
  • In 2016, North Korea carried out its fifth nuclear test as part of the state’s 68th anniversary since its founding. South Korea responded with a plan to assassinate Kim Jong-un. In February 2017, Kim Jong-nam, the eldest son of Kim Jong-il and half-brother of Kim Jong-un who from 1994 to 2001 was considered the heir apparent to his father, died after being attacked with a chemical weapon at the Kuala Lumpur International Airport. Kim Myung-yeon, a spokesperson for South Korea’s ruling party, described the killing as a “naked example of Kim Jong-un’s reign of terror.”

Key Terms

  • Sunshine Policy: The foreign policy of South Korea towards North Korea from 1998 to 2008. Since its articulation by South Korean President Kim Dae-jung, the policy resulted in greater political contact between the two states and some historic moments in inter-Korean relations.
  • Korean Demilitarized Zone: A highly militarized strip of land running across the Korean Peninsula. It was established at the end of the Korean War to serve as a buffer zone between the Democratic People’s Republic of Korea (North Korea) and the Republic of Korea (South Korea). It is a de facto border barrier that divides the Korean Peninsula roughly in half. It was created by agreement between North Korea, China, and the United Nations in 1953.
  • North Korean famine: A famine that killed somewhere between 240,000 and 3.5 million North Koreans between 1994 and 1998. It stemmed from a variety of factors. Economic mismanagement and the loss of Soviet support caused food production and imports to decline rapidly. A series of floods and droughts exacerbated the crisis. The North Korean government and its centrally planned system proved too inflexible to effectively curtail the disaster.
  • June 15th North–South Joint Declaration: An agreement adopted between leaders of North and South Korea in June 2000 after various diplomatic meetings between the North and the South. As a result of the talks, numerous separated families and relatives from the North and the South had meetings with their family members in Pyongyang and Seoul. Ministerial talks and North-South military working-level talks also followed in the second half of the year. North-South Red Cross talks and the working-level contacts for the North and South economic cooperation also took place.

Sunshine Policy

In 1998, South Korean President Kim Dae-jung announced the so-called Sunshine Policy towards North Korea. The main aim of the policy was to soften North Korea’s attitudes towards the South by encouraging interaction and economic assistance. The national security policy had three basic principles: no armed provocation by the North will be tolerated, the South will not attempt to absorb the North in any way, and the South actively seeks cooperation. Despite a naval clash in 1999, in 2000, the first Inter-Korean Summit between Kim Dae-jung and Kim Jong-il took place. As a result, Kim Dae-jung was awarded the Nobel Peace Prize. The summit was followed by the reunion of families divided by the Korean War. The same year, the North and South Korean teams marched together at the Sydney Olympics. Trade increased to the point where South Korea became North Korea’s largest trading partner. In 2003, the Kaesong Industrial Region was established to allow South Korean businesses to invest in the North. U.S. President George W. Bush, however, did not support the Sunshine Policy and in 2002 branded North Korea as a member of an Axis of Evil.

The June 15 North-South Joint Declaration that the two leaders signed during the first South-North summit stated that they would hold the second summit at an appropriate time. It was originally envisaged that the second summit would be held in South Korea, but that did not materialize. South Korean President Roh Moo-hyun walked across the Korean Demilitarized Zone in 2007 and traveled on to Pyongyang for talks with Kim Jong-il. The two sides reaffirmed the spirit of the June 15 Joint Declaration and had discussions on various issues related to realizing the advancement of South-North relations, peace on the Korean Peninsula, common prosperity of the people, and the unification of Korea. South Korean President Roh Moo-hyun and North Korean leader Kim Jong-il signed the peace declaration. The document called for international talks to replace the Armistice which ended the Korean War with a permanent peace treaty.

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The first and last page of the June 15 Declaration on display at the Unification Observatory in Paju, South Korea

The declarations states, “In accordance with the noble will of the entire people who yearn for the peaceful reunification of the nation, President Kim Dae-jung of the Republic of Korea and National Defense Commission Chairman Kim Jong-il of the Democratic People’s Republic of Korea held a historic meeting and summit talks in Pyongyang from June 13 to 15, 2000.”

In 2008, however, the new president of the South, Lee Myung-bak and his Grand National Party took a different stance to North Korea, and the South Korean government stated that any expansion of the economic cooperation at the Kaesong Industrial Region would only happen if the North resolved the international standoff over its nuclear weapons. Relations again chilled, with North Korea making military moves such as a series of short range ship-to-ship missile tests. South Korea’s response to the nuclear test included signing the Proliferation Security Initiative to prevent the shipment of nuclear materials to North Korea. In November 2010, the South Korean Unification Ministry officially declared the Sunshine Policy a failure, thus bringing the policy to an end.

Kim Jong-un’s Rule

In 2011, the supreme leader of North Korea Kim Jong-il died from a heart attack. His youngest son Kim Jong-un was announced as his successor. In December 2011, the leading North Korean newspaper Rodong Sinmun announced that Kim Jong-un had been acting as chairman of the Central Military Commission and supreme leader of the country. In 2012, a large rally was held by Korean People’s Army in front of Kumsusan Memorial Palace to honor Kim Jong-un and demonstrate loyalty. North Korea’s cult of personality around Kim Jong-un was stepped up following his father’s death.

Under Kim Jong-un, North Korea has continued to develop nuclear weapons. In 2013, Kim Jong-un announced that North Korea will adopt “a new strategic line on carrying out economic construction and building nuclear armed forces simultaneously.” According to several analysts, North Korea sees the nuclear arsenal as vital to deter an attack, but it is unlikely that the country would launch a nuclear war. In 2016, Kim Jong-un stated that North Korea would “not use nuclear weapons first unless aggressive hostile forces use nuclear weapons to invade on our sovereignty.” However, on other occasions, North Korea has threatened “preemptive” nuclear attacks against a U.S.-led attack. As of 2016, the United Nations has enacted five cumulative rounds of sanctions against North Korea for its nuclear program and missile tests.

Human rights violations under the leadership of Kim Jong-il were condemned by the UN General Assembly. Press reports indicate that they are continuing under Kim Jong-un. The 2013 report on the situation of human rights in North Korea by United Nations Special Rapporteur Marzuki Darusman proposed a United Nations commission of inquiry to document the accountability of Kim Jong-un and other individuals in the North Korean government for alleged crimes against humanity. The report of the commission of inquiry was published in 2014 and recommends making him accountable for crimes against humanity at the International Criminal Court.

A 2013 study reported that communicable diseases and malnutrition are responsible for 29% of the total deaths in North Korea. This figure is higher than that of high-income countries and South Korea, but half of the average 57% of all deaths in other low-income countries. Infectious diseases like tuberculosis, malaria, and hepatitis B are considered endemic as a result of the North Korean famine (1994-1998). The famine had a significant impact on the population growth rate, which declined to 0.9% annually in 2002 and 0.53% in 2014. In 2006, the World Food Program (WFP) and the Food and Agriculture Organization estimated a requirement of 5.3 to 6.5 million tons of grain in aid when domestic production fulfilled only 3.8 million tons. The country also faces land degradation after forests stripped for agriculture resulted in soil erosion. In 2008, a decade after the worst years of the famine, total production was 3.3 million tons (grain equivalent) compared with a need of 6 million tons. 37 percent of the population was deemed to be insecure in food access. Weather continued to pose challenges every year, but overall food production has grown gradually. In 2014, North Korea had an exceptionally good harvest, 5.08 million tonnes of cereal equivalent, almost sufficient to feed the entire population. While food production has recovered significantly since the hardest years of 1996 and 1997, the recovery is fragile, subject to adverse weather and year-to-year economic shortages.

North Korea’s GDP per capita has been less than $2,000 in the late 1990s and early 21st century.

Inter-Korean Relations Today

In recent years, several incidents have contributed to the growing tensions between South Korea and North Korea. In 2010, a South Korean ship with a crew of 104 sank in the Yellow Sea. Forty-six individuals died and 58 were rescued. A team of international researchers investigating the incident concluded that the sinking was caused by a North Korean torpedo. North Korea rejected the findings. South Korea agreed with the findings and President Lee Myung-bak declared that Seoul would cut all trade with North Korea as part of measures primarily aimed at striking back at North Korea diplomatically and financially. North Korea denied all such allegations and responded by severing ties between the countries and announced it abrogated the previous non-aggression agreement. The same year, North Korea’s artillery fired at South Korea’s Yeonpyeong island in the Yellow Sea and South Korea returned fire. The town was evacuated and South Korea warned of stern retaliation, with President Lee Myung-bak ordering the destruction of a nearby North Korea missile base if further provocation should occur.

Just two months later, North Korea launched a scientific and technological satellite and it reached orbit. The United States moved warships to the region. In 2013, tensions between North Korea and South Korea, the United States, and Japan escalated following the United Nations Security Council Resolution 2087, which condemned North Korea for the launch of the satellite. The crisis was marked by extreme escalation of rhetoric by the new North Korean administration under Kim Jong-un and actions suggesting imminent nuclear attacks against South Korea, Japan, and the United States.

In 2015, Kim Jong-un, in his New Year’s address to the country, stated that he was willing to resume higher-level talks with the South. However, in August 2015, a mine went off at the Korean Demilitarized Zone, wounding two South Korean soldiers. The South Korean government accused the North of planting the mine, which the North denied. Since then South Korea started propaganda broadcasts to the North. The same month, North Korea fired a shell on the city of Yeoncheon. South Korea launched several artillery rounds in response. Although there were no casualties, it caused the evacuation of an area of the west coast of South Korea and forced others to head for bunkers. The shelling caused both countries to adopt pre-war status, and a talk that was held by high-level officials in the Panmunjeom to relieve tensions. While talks were going on, North Korea deployed over 70 percent of their submarines. Talks, however, concluded when both parties reached an agreement and military tensions were eased.

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The Conference Row in the Joint Security Area of the Korean Demilitarized Zone, looking into South Korea from North Korea

When the Korean War ended, the country was devastated, but the division remained. North and South Korea continued a military standoff with periodic clashes. The conflict survived the collapse of the Eastern Bloc of 1989 to 1991. The U.S. maintains a military presence in the South to deter an attack from the North. In 1997, US President Bill Clinton described the division of Korea as the “Cold War’s last divide.”

In 2016, North Korea carried out its fifth nuclear test as part of the state’s 68th anniversary since its founding. South Korea responded with a plan to assassinate Kim Jong-un.

In February 2017, Kim Jong-nam, the eldest son of Kim Jong-il and half-brother of Kim Jong-un who from 1994 to 2001 was considered the heir apparent to his father, died after being attacked by two women in Malaysia with VX nerve agent (a chemical weapon) during his return trip to Macau, where he lived in exile, at the Kuala Lumpur International Airport. Kim Myung-yeon, a spokesperson for South Korea’s ruling party, described the killing as a “naked example of Kim Jong-un’s reign of terror.” The South Korean government accused the North Korean government of being responsible for Kim Jong-nam’s assassination and drew a parallel with the execution of Kim Jong-un’s own uncle and others. The government later held an emergency security council meeting where they condemned the murder of Kim Jong-nam. The acting President of South Korea, Hwang Kyo-ahn said that if the murder of Kim Jong-nam was confirmed to be masterminded by North Korea, it would clearly depict the brutality and inhumanity of the Kim Jong-un regime.

India under Modi

India under Modi, its right-wing, nationalistic Prime Minister, has gone through numerous neoliberal reforms that contribute to its impressive economic growth, pleasing businesspeople and industrialists but widening inequalities between the wealthy and the poor and highlighting the ongoing challenges of poverty, corruption, and gender violence.

Learning Objectives

Explain who Narendra Modi is and the status of India in the 21st century

Key Takeaways

Key Points

  • Narendra Modi is current Prime Minister of India (March 2017). He is a member of the Bharatiya Janata Party and of the Rashtriya Swayamsevak Sangh (RSS), a right-wing, Hindu nationalist, paramilitary volunteer organization. Modi was appointed chief minister of Gujarat in 2001. His administration has been considered complicit in the 2002 Gujarat riots. In 2012, Modi was cleared of complicity in the violence by a Special Investigation Team (SIT) appointed by the Supreme Court of India, but the question remains controversial.
  • Modi led the BJP in the 2014 general election, which gave the party a majority in the parliament. The economic policies of Modi’s government focused on privatization and liberalization of the economy based on a neoliberal framework. Modi updated India’s foreign direct investment policies to allow more foreign investment in several industries, including defense and the railways. Other reforms included removal of many of the country’s labor laws to make it harder for workers to form unions and easier for employers to hire and fire them. These reforms met with support from institutions such as the World Bank, but opposition from scholars and unions.
  • In 2014, Modi introduced the Make in India initiative to encourage foreign companies to manufacture products in India with the goal of turning the country into a global manufacturing hub. In 2015, he launched a program intended to develop 100 smart cities and the Housing for All By 2022 project, which intends to eliminate slums in India by building about 20 million affordable homes for India’s urban poor.
  • Modi’s government reduced the amount of money spent by the government on healthcare and launched a New Health Policy, which emphasizes the role of private healthcare. He also launched the Clean India campaign (2014) to eliminate open defecation and manual scavenging. As part of the program, the Indian government began constructing millions of toilets in rural areas and encouraging people to use them.
  • In naming his cabinet, Modi renamed the Ministry of Environment and Forests the Ministry of Environment, Forests, and Climate Change. In the first budget of the government, the money allotted to this ministry was reduced by more than 50%. The new ministry also removed or diluted a number of laws related to environmental protection.
  • Massive corruption, widespread poverty, and violence against girls and women constitute some of the greatest challenges in 21st-century India. According to the 2014 revised World Bank methodology, India had 179.6 million people below the poverty line, which means that with 17.5% of total world’s population, India had 20.6% share of world’s poor. Findings from the World Economic Forum have repeatedly indicated that India is one of the worst countries in the world in terms of gender inequality.

Key Terms

  • Bharatiya Janata Party: One of the two major political parties in India, along with the Indian National Congress. As of 2017, it is the country’s largest political party in terms of representation in the national parliament and state assemblies and the world’s largest party in terms of primary membership. It is a right-wing party with close ideological and organizational links to the Hindu nationalist Rashtriya Swayamsevak Sangh.
  • 2002 Gujarat riots: A three-day period of inter-communal violence in the western Indian state of Gujarat in 2002. Following the initial incident, there were further outbreaks of violence in Ahmedabad for three weeks. Statewide, there were further outbreaks of communal riots against the minority Muslim population for three months.
    The Chief Minister of Gujarat at that time, Narendra Modi, has been accused of initiating and condoning the violence as have police and government officials who allegedly directed the rioters and gave them lists of Muslim-owned properties.
  • Rashtriya Swayamsevak Sangh: A right-wing, Hindu nationalist, paramilitary volunteer organization in India widely regarded as the parent organization of the ruling party of India, the Bharatiya Janata Party. Founded in 1925, it is the world’s largest non-governmental organization that claims commitment to selfless service to India.

Narendra Modi

Narendra Modi (b. 1950) is current Prime Minister of India (March 2017), in office since May 2014. He was the Chief Minister of Gujarat from 2001 to 2014. He is the Member of Parliament for the Varanasi district (Utter Pradesh), a member of the Bharatiya Janata Party (BJP; one of the two major political parties in India, along with the Indian National Congress), and member of the Rashtriya Swayamsevak Sangh (RSS),  a right-wing, Hindu nationalist, paramilitary volunteer organization in India widely regarded as the parent organization of the BJP.

Born to a Gujarati family in Vadnagar, Modi helped his father sell tea as a child and later ran his own stall. He was introduced to the RSS at age eight, beginning a long association with the organization. He left home after graduating from school, partly because of an arranged marriage, which he did not accept. Modi traveled around India for two years and visited a number of religious centers. In 1971 he became a full-time worker for the RSS. During the state of emergency imposed across the country in 1975, Modi was forced to go into hiding. The RSS assigned him to the BJP in 1985 and he held several positions within the party hierarchy until 2001, rising to the rank of general secretary.

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India’s Prime Minister Narendra Modi in 2015: Modi was also declared winner of the Time magazine reader’s poll for Person of the Year in 2014, a feat which he repeated again in 2016. Forbes Magazine ranked him the 15th Most Powerful Person in the World in 2014 and the 9th Most Powerful Person in the World in 2015 and 2016. In 2015, Modi was one of Time’s “30 Most Influential People on the Internet” as the second most-followed politician on Twitter and Facebook. In the same year he was ranked fifth on Fortune Magazine’s first annual list of “World’s Greatest Leaders.”

Modi was appointed chief minister of Gujarat in 2001. His administration has been considered complicit in the 2002 Gujarat riots, a three-day period of inter-communal violence. Following the initial incident, there were further outbreaks of violence in Ahmedabad for three weeks. Statewide, communal riots against the minority Muslim population occurred for three months. According to official figures, the riots resulted in the deaths of 790 Muslims and 254 Hindus. 2,500 people were injured non-fatally and 223 more were reported missing. There were instances of rape, children being burned alive, and widespread looting and destruction of property. Modi has been accused of initiating and condoning the violence as have police and government officials who allegedly directed the rioters and gave them lists of Muslim-owned properties. In 2012, Modi was cleared of complicity in the violence by a Special Investigation Team (SIT) appointed by the Supreme Court of India. The SIT also rejected claims that the state government had not done enough to prevent the riots. The Muslim community reacted with anger and disbelief. In 2013, allegations were made that the SIT had suppressed evidence, but the Supreme Court expressed satisfaction over the SIT’s investigations. While officially classified as a communalist riot, the events have been described as a pogrom by many scholars. Other observers have stated that these events met the legal definition of genocide and called it an instance of state terrorism or ethnic cleansing.

India Under Modi

Modi led the BJP in the 2014 general election, which gave the party a majority in the parliament, the first time a single party had achieved this since 1984. Credited with engineering a political realignment towards right-wing politics, Modi remains a figure of controversy domestically and internationally over his Hindu nationalist beliefs and his role during the 2002 Gujarat riots, cited as evidence of an exclusionary social agenda.

The economic policies of Modi’s government focused on privatization and liberalization of the economy based on a neoliberal framework. Modi updated India’s foreign direct investment policies to allow more foreign investment in several industries, including defense and the railways. Other reforms included removing many of the country’s labor laws to make it harder for workers to form unions and easier for employers to hire and fire them. These reforms met with support from institutions such as the World Bank, but opposition from scholars within the country. The labor laws also drew strong opposition from unions. The funds dedicated to poverty reduction programs and social welfare measures were greatly decreased by the Modi administration. The government also lowered corporate taxes, abolished the wealth tax, reduced customs duties on gold and jewelry, and increased sales taxes.

In 2014, Modi introduced the Make in India initiative to encourage foreign companies to manufacture products in India, with the goal of turning the country into a global manufacturing hub. Supporters of economic liberalization supported the initiative, while critics argued it would allow foreign corporations to capture a greater share of the Indian market. To enable the construction of private industrial corridors, the Modi administration passed a land-reform bill that allowed it to acquire private agricultural land without conducting social impact assessment and without the consent of the farmers who owned it. The bill was passed via an executive order after it faced opposition in parliament, but was eventually allowed to lapse. In 2015, Modi launched a program intended to develop 100 smart cities, which is expected to bring information technology companies an extra benefit of ₹20 billion (US$300 million). Modi also launched the Housing for All By 2022 project, which intends to eliminate slums in India by building about 20 million affordable homes for India’s urban poor.

Modi’s government reduced the amount of money spent by the government on healthcare and launched a New Health Policy, which emphasizes the role of private healthcare. This represented a shift away from the policy of the previous Congress government, which had supported programs to assist public health goals, including reducing child and maternal mortality rates. Modi also launched the Clean India campaign (2014) to eliminate open defecation and manual scavenging. As part of the program, the Indian government began constructing millions of toilets in rural areas and encouraging people to use them. The government also announced plans to build new sewage treatment plants.

Notable Indian exports include refined petroleum oils, diamonds, gold, jewelry of precious metal, rice, and cars.

India Exports by Product (2014) from Harvard Atlas of Economic Complexity

Modi’s reformist approach has made him very popular with the public. At the end of his first year in office, he received an overall approval rating of 87% in a Pew Research poll, with 68% of people rating him “very favorably” and 93% approving of his government. At the end of his second year in office, an updated Pew Research poll showed Modi continued to receive high overall approval ratings of 81%, with 57% of those polled rating him “very favorably.”

In naming his cabinet, Modi renamed the Ministry of Environment and Forests the Ministry of Environment, Forests, and Climate Change. In the first budget of the government, the money allotted to this ministry was reduced by more than 50%. The new ministry also removed or diluted a number of laws related to environmental protection. These included no longer requiring clearance from the National Board for Wildlife for projects close to protected areas and allowing certain projects to proceed before environmental clearance was received. Modi also relaxed or abolished a number of other environmental regulations, particularly those related to industrial activity. A government committee stated that the existing system only created corruption and that the government should instead rely on the owners of industries to voluntarily inform the government about the pollution they were creating. In addition, Modi lifted a moratorium on new industrial activity in the most polluted areas. The changes were welcomed by businesspeople, but criticized by environmentalists.

Challenges in 21st-Century India

Corruption has been one of the pervasive problems affecting India. In 2015, India was ranked 76th out of 168 countries in Transparency International’s Corruption Perceptions Index. The largest contributors to the corruption are social welfare programs and social spending schemes enacted by the Indian government. The media have widely published allegations of corrupt Indian citizens stashing millions of rupees in Swiss banks. Swiss authorities, however, denied these allegations, which were subsequently proven in 2015-2016. The Indian media is mainly owned by corrupt politicians and industrialists who also play a major role in most of these scams, misleading public with wrong information and using media for mud-slinging their political and business opponents. The causes of corruption in India include excessive regulations; complicated tax and licensing systems; numerous government departments, each with opaque bureaucracy and discretionary powers; a monopoly of government-controlled institutions on certain goods and services, and the lack of transparent laws and processes.

Poverty in India continues to be a critical issue, despite having one of the fastest growing economies in the world. According to Global Wealth Report 2016 compiled by Credit Suisse Research Institute, India is the second most unequal country in the world with the top one percent of the population owning nearly 60% of the total wealth. Another urgent problem facing India’s economy is the sharp and growing regional variations among its different states and territories in terms of poverty, availability of infrastructure, and socio-economic development. Six low-income states – Assam, Chhattisgarh, Nagaland, Madhya Pradesh, Odisha, and Uttar Pradesh – are home to more than one-third of India’s population. Severe disparities exist among states in terms of income, literacy rates, life expectancy, and living conditions. Following Modi’s liberalization, the more advanced states have been better placed to benefit from reforms, with well-developed infrastructure and an educated and skilled workforce that attract the manufacturing and service sectors. There is a continuing debate on whether India’s economic expansion has been pro-poor or anti-poor. Studies suggest that the economic growth has been pro-poor and has reduced poverty in India although the statistics continue to paint a dire picture. According to the 2014 revised World Bank methodology, India had 179.6 million people below the poverty line, which means that with 17.5% of total world’s population, India had 20.6% share of world’s poor.

Women in India continue to face numerous problems, including violent victimization through rape, acid throwing, dowry killings, marital rape, and the forced prostitution of young girls. In 2012, the Thomson Reuters Foundation ranked India as the worst G20 country in which to be a woman. Although this report has faced criticism for inaccuracy, findings from the World Economic Forum have repeatedly indicated that India is one of the worst countries in the world in terms of gender inequality.